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The Tale of Emily White, Scarcity and the Future of Music Products

Unless you spent the first half of this week on the digital music equivalent of planet Mars, you will have noticed the Emily White furore. The long and short of which was NPR (US public radio) Intern Emily White blogging that she owned 11,000 songs of which just 15 were albums that she had purchased and pining for a universally available universal database of music. The post was swiftly followed by reasoned critiques against, for, against, and for, and also by vacuous foul mouthed grandstanding. What surprised me wasn’t the strength of feeling on the topic, but a view by some that this was somehow a watershed moment, a changing in collective perspective. It wasn’t. For anyone who has followed this space closely for more than a few years this debate will be seen as another chapter in a long-running discourse. An important chapter, but just a chapter nonetheless. Long time readers of my blog will remember a series of posts on ‘why music can’t just be free’ and the heated debate that surrounded them. For those who didn’t, some of the posts are here and here. (And for an insight into how ‘free’ impacts an artist take a look at this evergreen artists’ post.)

But the point of this post isn’t just to pour another layer of opinion into the simmering cauldron. Instead I want to try to move the debate on from diagnosing the symptoms onto identifying a potential cure, or at the very least some palliative care.

For argument’s sake let’s assume the following:

A large share of consumers have fallen out of the habit of buying music and a larger share of younger consumers have simply never learned the habit

Fewer people place a monetary value on music than used to and yet more people listen to more music than ever before

High spending music consumers do exist though, and across all age groups, albeit in declining numbers

Understanding the Role of Scarcity

The key reason fewer people buy music is because they don’t have to. In the analogue age there was a monopoly on supply of music: if you wanted to get new music you had to buy it in high street shops when record labels decided you could, paying the price they and retailers decided you should. The alternative was making a poor quality cassette copy from the radio or friends. People who liked music had little choice but to associate a very specific monetary value to music. Napster threw that scarcity model out the window. With paying for music now a life style choice the monetary value of music has been subjected to hyper deflation. The ‘price it and they will come’ logic now only applies to a small subset of music fans, a subset that is at risk of becoming an endangered species.

This doesn’t mean people don’t value music anymore, but instead that a majority no longer value it monetarily. This dynamic is beautifully encapsulated in a response from a 12 year old file sharer that Feargal Sharky was fond of quoting

“I love music and if I could download my Nike I would pay for my music”.

Nike still has scarcity, that’s why so many kids pay for their trainers but not their music. Like it or loathe it, as far as music products are concerned, we are in the post-scarcity age.

What, if Anything, Can Be Monetized in the Post-Scarcity Age?

So if scarcity has gone – and it is gone for good – how can recorded music revenues ever be rebuilt? Indeed should they? Some argue that charging for music is an outdated model, but you will find that 99.999% of those people also believe that they should still be able to get that exact same music which they don’t think should be paid for i.e. they value the product, just not the price. Their world view is shaped by the last decade of experience but lacks grounding in basic economics. The music needs making and that costs money. Whether that is the money the label invests when it takes a punt on an artist or the cost of an artist getting by on an often very modest income.

Arguing that artists should make their real money in ‘ancillary services’ misses the bigger picture. Only a tiny subset of music fans pay for merchandize and only about half of music buyers go to concerts. And the number 1 music consumption channel? It’s still radio. So those ancillary revenues are a much smaller addressable market. They are also largely irrelevant if you are a songwriter rather than a performer.

Recorded music is still the core product. 95% of us listen to music most days. The vast majority of music consumption (by all people) is recorded music. Why shouldn’t it also be the core revenue stream? Scarcity has been disrupted, not market demand. None of us would reasonably expect a plumber to fix our washing machine for free and then go out into the street and make his money by selling overalls and tools. Also let’s not forget that most artists make music because they love making music, not T-Shirts.

Why the Flat-Rate Isn’t the Answer

Don’t get me wrong: of course artists have to learn how to make money across a much wider range of income streams than ever before, but there is no inherent reason that they should have to accept that their core creative asset is no longer monetize-able. The channel, product and pricing strategies may be broken, but the creative heartbeat of music is not. Simply applying a ‘flat rate’ fee on all the music in the world might seem like an elegant and ‘convenient’ solution. But it will only exacerbate the problem. It will formalize and legitimize the concept that music has little value. It will also accelerate the demise of those music fans who still like to support their favourite artists by buying their music. ‘Flat Rate’ is a pricing strategy for the low end of the music market, not all of it. Even if music has to end up like water, there should still be a market for bottled mineral water.

Of course unlimited access to music in the cloud will play a really important part of the future of music, it will probably be how most people consume music. But that is a service which should have clear monetary value. Everyone accepts that premium Cable and Satellite TV packages are paid for commodities. In fact consumers pay more to have some of that content provided on-demand. The reason it is different for music (and indeed news) is of course scarcity.

The New Wave of Scarcity

Scarcity still exists for music, predominately in the form of live, and consumers pay premiums accordingly. If recorded music spending is ever going to rebound, scarcity must be reintroduced to music product strategy. Not, however, scarcity in the sense of building walls around content (it will always leak out) but instead by creating scarcity of experience. The success stories of paid content to date (iTunes, Kindle, xBox, PlayStation etc) may be walled gardens but their success is derived from the quality of experience that is delivered within them and cannot be experienced externally. Music products must learn how to create uniquely valuable experiences around music, fully leveraging the interactivity, connectivity and sociality of the contemporary digital world. Current digital music products do not do so. As I outlined in my Music Format Bill of Rights report (which you can download for free here) music products must be:

Dynamic

Interactive

Social

Connected

The future of music products will be app like experiences that deliver unique, interactive and curated music experiences where the whole will be far greater than the sum of the parts (see figure). Pirating the individual components will lack the context rich, curated and programmed environments in which the music experiences will occur, and will consequently have massively diminished value. Scarcity will have returned to music products.

Waiting for an iPad Moment

Monetizing convenience only accelerates a race to the bottom. Convenience should be an inherent part of the value of music products, but only one part. Just because current music products don’t deliver enough tangible extra value to persuade the likes of Emily White to pay for music does not mean that it must always be thus. Until 26 months ago the market between smartphones and laptops was that of netbooks. At that stage most consumers not only did not own a netbook, they would have reported that they never intended to buy one either. Then along came the iPad and suddenly we have a product revolution on our hands. An apparently dead market segment transformed virtually overnight into gold-rush prosperity.

The music industry needs an iPad moment. When it does come (and it will) even the likes of Emily White may finally start to see the value in paying for music again.

12 thoughts on “The Tale of Emily White, Scarcity and the Future of Music Products”

Nice summary, though iw ould say that its not that Emily doesn’t see the value in paying for music, its that $-for-a-copy-of-the-song is the wrong transaction, now that NOT-$-for-a-copy-of-the-song is ubiquitous, easier, more popular and more social than what most labels would prefer.

The transaction needs to adjust toward something ‘worth paying for’ that one can’t get through the now-mainstream “piracy” / Spotify models.

It’s interesting to me that in both the pre- and post-scarcity worlds, price was only rarely used to differentiate premium content. That is, except for “double albums” (where there was a clear incremental price to pay for *more* content) all LP’s and CD’s were pretty much priced the same. Instead of price, the charts (and radio play and retail merchandising) signified value to buyers. I guess the same is true for other media (e.g. movie tickets), but even books have more variation in pricing at introduction (though they follow a fairly predictable pricing pattern from hardcover to paperback).

So, question: in a post-scarcity environment characterized “DISC” products, will this still be true? I remember reading that Steve Jobs lobbied very hard to establish a uniform $0.99 for tracks on iTunes, but presumably that was because there was an important precedent in vinyl, and a real (or “real enough”) need to avoid confusion.

Agreed the music monetizing capability seems to be about an interactive unique experience. At this point ANYTHING that is easily convertible into 1s and 0s should almost be considered a (relatively) freely available type of information potentially representing a tremendous leap in global human progress, communication, knowledge and entertainment. Obviously technological progress has surpassed the (mostly unenforceable) IP laws created for a past and different paradigm. Maybe it’s time to devise a system that supports and embraces this reality?

in almost every market there are good better and best ways to monetize products and services. with digital, the market for music has reverted back in the direction of that which existed for minstrels once upon a time. engagement is acomplished by many services on the web better than music and to your point about scarcity and some walled garden successes. the well paid successes these days work hard touring. “live” has become valuable again because it produces the engagement lacking for artists expecting too much without producing meaningful engagement elsewhere in the digital medium. take an artist like anders osborn. most do not know him but his energy is in the live performace and his recorded music sells because he keeps people wowed by that different energy and creativity. warren haynes is often called the hardest working guy in the business and that is crucial to his mix of being an exceptional guitarist. take any one of the storied jam bands with a large following as great examples. the record biz was a technological fad and music is back to being a grind. the digital conundrum should be seen as a good thing and not a bad thing because it is a chance to easiy find new customers and should not be about wagging fingers. I have many favorite songs recorded live and in studio and the best thing is to look forward to hearing them live. new security in the digital realm will catch more people over time but musicians are learning that fans are the best source of customers. Making too big a point about people like Emily will encourage pining for a past not likely to come back. Get emily out to a show and dancing. that may change her perspective.

Jeremy – co-existence with existing services such as Spotify is indeed key. But it requires a view that the current landscape of digital music services is a network of distribution channels rather than products. So for example the strategy is how to replicate a version of a new product experience on Spotify using Spotify apps.
Barry – pricing strategy has undoubtedly been utterly transformed in the digital age: Steve Jobs pushed for uniform pricing because Apple understood CE pricing principles and wanted to apply them to music. It created great consumer clarity but didn’t recognize that there are complex cycles of music pricing. For example a new frontline release will be most valuable in that first release cycle. It will then decrease in value for a few years. If it was a strong enough release it will then start to regain value again as it becomes a classic re-release. If not its value may continue to diminish.
CB – as more value gets delivered through experiences, curation and context, there arises the issue of what is the most monetizable asset, how is that protected and how is the creator compensated.
Dave – I agree that live is becoming more important and that this is where the core creativity and artist-fan engagement can exist. But those who are go to live performances is only a subset of music fans. Remember that life stage plays a massive role. If you’re young teenager you don’t have the money or parental permission to go to many gigs. If you’re a 30’s something parent of two you don’t have the time to go to many gigs. If you’re a retiree you probably don’t have the inclination to go to many gigs. Also live albums just don’t sell that well. They serve the core aficionado audience of an artist only. In the digital age of mass distribution and mass access, recorded music products make more sense than ever before. We just haven’t hit on the right product mix yet.

Also with regards to minstrels, here’s a quote from a post I wrote a few years ago on the the role of minstrels in the history of musicians:

Many people have referred to how musician’s thrived in the days before copyright. I’m sorry but this simply isn’t the case. In the middle ages musicians could largely be grouped into three groups

– Troubadors: the elite of musicians, but also the elite of society, typically nobility and royalty (including Richard Lionheart of England). They didn’t make or even ask for money, it was an elitist past time
– Minstrels: artisans who traveled around, depending on the patronage of the wealthy and aristocracy, such as Eleanor Aquitaine. A small number become fixtures at a court, most were forced to travel around most of their lives in search of the next fee
– Jongleurs: these were the majority of musicians. Typically itinerant and paid infrequently and poorly. A poor existence that was only marginally more lucrative than being a field tilling serf

After the middle ages royal and noble courts developed the practice of supporting retained musicians who would be commissioned to create compositions. These musicians were vulnerable to the whims of their paymasters and many musicians considered great now, struggled financially in their life times. Mozart died in poverty, buried in quicklime in a paupers’ grave (though his own financial ineptitude played a key role). Musicians like most artists in history before effective monetization of copyright struggled for money.

Historically the great majority of music recordings had no commercial value. Only the big hits did and nobody knew what they were before the event. Like a lottery ticket a new work could be worth a fortune or, far more likely, it would be worthless.

That’s still true really. The hit is the scarcity and always was. Of course there are now so many more contenders and the ones that fly successfully above the flock can no longer be controlled like they used to be. The game is changing with interesting possibilities emerging on route to who knows where.

I would’ve thought Emily White’s desire for the big database in the sky was well satisfied already what with all the new digital services providing ready access. How much more does anyone need? And although I side with her against Lowery’s reactionary stance he raises a good question when he asks who will finance the new work in future. Possibly no one is the answer and it will support itself in a kind tech assisted amateurism.

That’s okay as far as it goes, but like in film, radio, television, journalism and the rest, when all the professionals have left the building something will have been lost. We might then have to go looking for them again. Maybe that’s where there is real potential for new thinking, less at the consumer end which is already well catered to, and more at the place where creative work starts its life. Historically the tech companies played an important role there. Is it time for their modern day equivalents to do the same?